Back in 2018, I came across a Canadian universal life policy policy that paid at least a 4% guaranteed return on policy cash value. The kicker – in the US, you are limited by tax law as to how much can be put into a life insurance policy – in Canada that was not the case.
The policy – issued by Manulife, drew the attention of Canadian hedge funds looking for a place to stash cash at higher than market rates that were guaranteed. One investor put $11M into the policies as a method to generate extra cash.
Fixed rates the carrier could generate were much lower, so Manulife was looking at a problem. One expert testified that for every dollar put into the contracts Manulife could lose 45 cents.
In October of 2018, the Saskatchewan government stepped in and changed the regulations for certain life policies, limiting the amounts that could be contributed and squashing investors’ hopes for unlimited returns.
The folks at Manulife breathed a sigh of relief, but the investors pressed on hoping to overturn the ruling that limited their investment scheme.
Is it over?
Last Wednesday, an appeals court shot the investors down and ruled that the Saskatchewan regulation would stand. The amount that could be put into a policy would be limited to an amount equal to premium required under the contract.
The hedge fund that brought the case is reviewing the decision, but for now, the search for the pot of gold appears to be over.